10.01.202211:17 Forex Analysis & Reviews: US stock market closes first week of 2022 with losses

S&P 500

The US stock market closed the first week of 2022 with losses.

On Friday, major US indices wrapped up the first week of the new year with losses: the Dow Jones Industrial Average lost 0.1%, the NASDAQ Composite fell by 1%, and the S&P 500 declined by 0.4%.

At the opening of the week, S&P 500 futures added 0.1%, while Chinese indices gained 0.2%.

Energy market: oil is staying firm near highs posted in late November. Brent is trading at $81.70. Oil prices are rather high as OPEC and its allies continue to maintain a supply deficit in the world oil market - a 400,000 barrel-a-day increase scheduled for February - slower than an increase in oil demand amid global economic growth.

Epidemiological situation: more than 2.2 million cases were reported in the world on Saturday. The United States recorded 700,000 new daily cases last week and about 300,000 at the weekend. However, this data is inaccurate. Western Europe is once again suffering from a major outbreak of the virus. Yesterday, France reported 300,000 new infections, Italy and Britain - 150,000 and 180,000 respectively. However, mortality rates are rather low - 300 deaths with 300,000 cases in the US.

S&P 500: 4,677. Trading range: 4,640 - 4,700.

Amid last week's decline, technology stocks were the hardest hit. Since the opening of the year, the NASDAQ Composite has tumbled by 800 points, or about 5%, to 14,930 from 15,730. The reasons for such a steep decline in the US market: retargeting in the market taking into account the upcoming Fed's interest rate hike in the middle of the year and probably in March; a long overdue correction; as well as a major outbreak of the omicron strain in the country. The 10-year Treasury yield rose by 1.76%, the highest level since spring 2020.

News: The US jobs report released on Friday showed that the economy added 199,000 jobs in December, while the unemployment rate fell below 4%, to 3.9%, a comfortable level for the Fed to raise interest rates.

This week's macroeconomic calendar includes the US inflation report for December to be published on Wednesday. The inflation rate in the US is almost 7%, while core inflation is almost 5%, data for November shows. Inflation is the main reason for the Fed's upcoming rate hike.

The market will also pay attention to politics, particularly on the US-Russia and NATO-Russia negotiations on security issues. The negotiations are triggered by an ultimatum issued by Russia to the US and NATO demanding the withdrawal of NATO troops from Eastern Europe. The talks will hardly end successfully.

USDX: 95.90. Trading range: 95.60 - 96.20. The US dollar index tumbled on Friday amid the euro's rally against the dollar. However, both the euro and the dollar index have not gone beyond their ranges so far.

USD/CAD: 1.2650. Trading range: 1.2580 - 1.2700. High oil prices pushed the pair to the lower boundary of the range. A downward breakout of 1.2600 is possible.

Conclusion: the US market is ready for a new wave of losses as the correction has just begun. At the same time, we may see an upward rebound and a new attempt to grow.